Asian brands lead Vietnam franchise drive

Mar 23, 2015

Sean T. Ngo, managing director of VF Franchise Consulting, a leading franchising and licensing consultancy with offices in Vietnam and Singapore talked with VIR’s Nguyen Chung about the latest foreign brands registering their trademarks in the country, as well as expectations for Vietnam’s franchise market.

What are the latest international brands considering franchise opportunities in Vietnam?

While we have been in discussions with multiple brands for multiple groups in Vietnam, some of those discussions have ended in the past few months as foreign brands haven’t been able to accept the changes in key terms and conditions for their franchises. Recent enquiries show continued interest in brands such as Rocky Mountain Chocolate Factory, Denny’s, and Manhattan Fish Market. It typically takes anywhere from 6 to 18 months for a franchise to be granted in Vietnam.

How many international brands have developed ties with Vietnamese partners last year or so, and what’s your opinion on the quality of Vietnamese franchise partners?

Many of the international brands that entered Vietnam in 2014 were from Asia, from places such as Korea, Japan, Singapore and Thailand. Asian brands typically require lower development commitments from local franchisees and in general have lower franchise fees and royalties. This is offset, of course, with lower brand equity and awareness as many Asian brands are of smaller size and younger in age.

Of course, McDonald’s entry was very high profile, and early signs continue to support its business model in Vietnam for the longer term. As Vietnam’s franchise industry is still relatively young, there is insufficient meaningful data to show whether local franchise operators are making a success of international franchise brands.

From an anecdotal perspective, it appears that some brands are successful while others are not so successful. Successful brands include Domino’s Pizza, Popeye’s Chicken, Texas Chicken, and Coffee Bean & Tea Leaf. The number one criterion for success continues to be the careful selection of the “right” franchisee from the very beginning.

What’s your opinion on franchise operations last year and what’s your prediction for this year?

Vietnam’s franchise market will continue to show growth at around 20-25 per cent with a few large, international brands and many smaller Asian brands entering the market. We are also witnessing a larger group of small Vietnamese brands that are exploring the possibilities of franchising their brands in Vietnam and the region, beyond the usual suspects such as Pho 24, Highlands Coffee, Wrap and Roll, Mon Hue, etc. Many Vietnamese companies with traditional business in sectors such as retail, fashion, food & beverage, real estate, finance, food processing, agriculture, textiles, distribution, and other industries continue to show stronger interest in diversifying into the franchise industry.